Tag Archives: Gold

Beware of price weakness in ‘hot’ sectors. Lower prices tend to become self-fulfilling prophecies. This is a classic way that investors incur unrecoverable losses: by chasing returns, then throwing in the towel:

Your opportunity cost of buying gold this summer rather than equities: -16%!!!

Here is a chart of the price of gold. Gold if off over 10% from its highs, and from a technical perspective it stands on a precipice. The 50-day moving average is about to cross the 200-day moving average. This is a damning, bearish event for something that trades purely on sentiment:

Here is how the price of gold looks after yesterday’s sell off based on what is perceived to be a more hawkish stance (more likely to raise rates) by the Fed:

I was recently asked by the Latvian finance magazine ‘Kapitals’ what I thought of gold.

My response was as follows:
“The market is waiting for the Fed to act. If inflation continues to grow, the Fed will increase rates. In turn, if rates increase, the price of gold will decrease. The previous period was successful for investment in gold. Nevertheless, the gains could be lost quickly. Gold does not produce anything; it does not bring an extra return and requires you to cover storage costs. Besides, assets that may decrease in price by up to 40% cannot be classified as either risk-free or reliable,”

The increased likelihood of interest rate hikes this year by the US Fed has been damaging to gold. I would expect this to continue.

Here’s a one year chart of the price of gold. As you can see, gold has traded off over 4% from its recent highs and has traded through its 50-day moving average. Moreover, it looks like it will be testing its 100-day moving average at around $1300 – another important psychological level:

Silver is faring even worse. It has lost almost 10% from its recent highs: